The Harvard Business Review has for the past couple of weeks been hosting a hoedown of an online debate on How to Fix Business Schools. Upon initial examination I thought it suffered a little from the usual malady of such giant group blog efforts: Lots of people saying their piece with little reference to what everybody else has said. But then I started looking at the comments. The discussion after Chicago business school prof Steve Kaplan’s defense of economists in business schools, for example, is pretty cool.
Human beings are self-interested today and they always have been.
The economy has experienced booms and busts for decades, if not centuries, well before economists taught in MBA programs. The geneses of the Panic of 1907 and the Great Depression have many similarities to those of the current crisis. The tools economists give to students better equip them to understand the business world they will experience. In fact, one of the ways CEOs of financial services firms (e.g., Lehman’s Dick Fuld, Merrill Lynch’s Stan O’Neal and Citigroup’s Charles Prince) failed was in not understanding the agency theory and economics taught in business school. In particular, it is a simple economic point that it is a bad idea to pay up front fees and bonuses for investments or loans that have long-term payoffs.
I … want to challenge the Professor Kaplan’s comment that “Human beings are self-interested today and they always have been.” There is a stream of research — which economists routinely ignore, reject, or are unable to process — that shows self-interest is not hardwired as he implies, and it is fact a social norm that gets stronger or weaker depending on the assumptions that people hold about their own behavior and those around them.
Business schools moved to a model that emphasized quick thinking, confident elocution and a style of reasoning that looked more like combat than it did contemplation. Indeed, the entire case study approach values explicit data (economic or otherwise) at the expense of intuition, snappy answers at the expense of thoughtful questions, and competition at the expense of collaboration. Students are rarely encouraged to confess “I don’t know, but wonder if…” They’re instead encouraged to look like they know the answer, whether they know it or not. We didn’t just teach students that economists view people as self-serving with guile. We taught students that they should be self-serving with guile if they wanted to do well in our classes. And we taught them the “soft skills” they needed to get really good at it.